REG - Utilico Emerging Mkt - Half-year Report
25/11/2024 07:00
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RNS Number : 4174N Utilico Emerging Markets Trust PLC 25 November 2024
Date: 25 November 2024
UTILICO EMERGING MARKETS TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS TO 30 SEPTEMBER 2024
Utilico Emerging Markets Trust plc ("UEM" or the "Company") today announced
its unaudited financial results for the six months to 30 September 2024.
Highlights of results for the six months to 30 September 2024:
· Net asset value ("NAV") total return per share of -1.4%*
· NAV per share of 266.00p per share, down 2.9%
· Gross assets of £519.4m*, a decrease of 0.7%
· Annual compound NAV total return since inception of 9.1%*
· Dividends per share totalled 4.475p for the period, an increase
of 4.1%. Dividends were fully covered by earnings
· Revenue earnings per share ("EPS") increased 9.9% to 6.54p
· Total revenue income remained almost unchanged at £14.7m (2023:
£14.8m)
*See Alternate Performance Measures on pages 41 to 43 of the Half-Yearly
Financial Report for the six months to 30 September 2024
The Half-Yearly Financial Report for the six months to 30 September 2024 will
be posted to shareholders in early December 2024. A copy will shortly be
available to view and download from the Company's website at
www.uemtrust.co.uk (http://www.uemtrust.co.uk) and the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . Please click on
the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/4174N_1-2024-11-23.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4174N_1-2024-11-23.pdf)
John Rennocks, Chairman of UEM said: "The half year to 30 September 2024
continued to be challenging with elevated volatility in most markets as
uncertainty has dominated. Consequently, UEM delivered a weaker performance
with a negative NAV total return of 1.4% for the half year to 30 September
2024. This was below the MSCI Emerging Markets total return Index for the half
year which was up 7.5%. However, UEM has outperformed the MSCI EM Index over
the long term with annual compound NAV total return since inception to 30
September 2024 of 9.1% exceeding the MSCI EM total return Index of 7.6%. UEM
has declared two quarterly dividends of 2.15p and 2.325p each, totalling
4.475p per share, a 4.1% increase over the previous half year. Dividends
remain covered by the EPS. The retained earnings revenue reserve increased by
£4.3m over the half year to 30 September 2024 to £14.4m, equal to 7.64p per
share. Disappointingly, UEM's share price discount has remained stubbornly
high. Having started the year at 19.3%, it has reduced modestly to 18.4% as at
30 September 2024. This remains well above the level that the Board expects to
see over the medium term. The Company has continued buying back shares for
cancellation, with 2.9m shares bought back in the half year to 30 September
2024, at an average price of 224.06p."
Charles Jillings, Investment Manager of UEM added: "UEM's NAV performance
since inception is ahead of the MSCI EM total return Index. UEM has achieved
this together with a rising dividend payout; lower volatility (as at 30
September 2024, UEM's five year Beta was 0.82x); and with a portfolio which is
significantly differentiated from the MSCI EM Index, reflected by UEM having
an active share of over 98%. For investors who want exposure to emerging
markets, excellent performance and comparatively low levels of volatility, UEM
should be a compelling investment."
Contacts: Joint Portfolio Manager and Company Secretary
ICM Investment Management
Limited
+44(0)1372 271486
Charles Jillings / Alastair
Moreton
Public Relations
Montfort
Communications
+44(0)20 3770 7913
Gay Collins / Nita Shah
utilico@montfort.london (mailto:utilico@montfort.london)
Joint Brokers
Shore
Capital
+44(0)20 7408 4090
Gillian Martin / Sophie Collins
Barclays
Bank
+44(0)20 7623 2323
Dion Di Miceli / Stuart Muress
BarclaysInvestmentCompanies@barclays.com
(mailto:BarclaysInvestmentCompanies@barclays.com)
Performance Summary
% Change
Half-year Half-year Annual Mar -
30 Sep 2024 30 Sep 2023 31 Mar 2024 Sep 2024
NAV total return per share1 (%) (1.4) 6.0 12.8 n/a
Share price total return per share1 (%) 0.1 4.3 5.8 n/a
Annual compound NAV total return1 (since
inception) (%) 9.1 9.4 9.5 n/a
NAV per share (pence) 266.00 261.58 274.01 (2.9)
Share price (pence) 217.00 222.00 221.00 (1.8)
Discount1 (%) (18.4) (15.1) (19.3) n/a
Earnings per share
- Capital (pence) (10.96) 8.24 20.48 (233.0)3
- Revenue (pence) 6.54 5.95 8.83 9.93
Total (pence) (4.42) 14.19 29.31 (131.1)3
Dividends per share (pence) 4.4752 4.300 8.600 4.13
Gross assets1 (£m) 519.4 529.2 522.9 (0.7)
Equity holders' funds (£m) 499.9 517.3 522.9 (4.4)
Shares bought back (£m) 6.5 9.9 25.4 (34.3)3
Net cash/(overdraft) (£m) 17.8 (2.2) 5.8 206.9
Bank loans (£m) (19.5) (11.8) - -
Net (debt)/cash (£m) (1.7) (14.0) 5.8 (129.3)
Net (gearing)/cash1 (%) (0.3) (2.7) 1.1 n/a
Management and administration fees and 3.8 3.7 2.73
other expenses (£m) 7.7
Ongoing charges figure1 (%) 1.54 1.44 1.5 n/a
(1) See Alternative Performance Measures on pages 41 to 43 of the
Half-Yearly Financial Report for the six months to 30 September 2023
(2) The second quarterly dividend declared has not been included as
a liability in the accounts
(3) Percentage change based on comparable six month period to 30
September 2023
(4) For comparative purposes the figures have been annualised
Chairman's Statement
The half year to 30 September 2024 continued to be challenging with elevated
volatility in most markets as uncertainty has dominated. For UEM, there were
two particular headwinds comprising the revaluation of Petalite Limited
("Petalite") and currency. With 26.2% of the portfolio invested in Brazil, the
depreciation of the Brazilian Real of 13.4% over the half year against
Sterling has been a significant challenge.
Consequently, UEM delivered a weaker performance with a negative NAV total
return of 1.4% for the half year to 30 September 2024. This was below the MSCI
Emerging Markets total return Index for the half year which was up 7.5%.
UEM measures its performance on a total return basis over the long term and
the Investment Managers are seeking long term outperformance. Despite
difficult markets, UEM has outperformed the MSCI EM Index over the long term
with annual compound NAV total return since inception to 30 September 2024 of
9.1% exceeding the MSCI EM total return Index of 7.6%. Since inception, UEM's
NAV total return was 435.7% as at 30 September 2024 versus the MSCI EM total
return Index of 310.4%.
Global Economy
There are significant challenges facing the markets and these are all
intertwined. Historically we have highlighted a number of these, and they
largely remain unresolved given a considerable rise in nationalism, wealth
inequality, global migration, climate change and geopolitical tensions.
Equity markets have broadly continued to move up as they anticipate central
banks' rate cuts, although the continuation of elevated interest rate has
surprised economic commentators.
Emerging Markets
EM stock markets were up for the half year, with the Asian markets leading the
way. The Hang Seng Index was up 27.8%, the Indian Sensex Index up 14.5% and
the Shanghai SE Composite Index was up 9.7%.
All portfolio currencies trended down against Sterling. The Brazilian Real was
down 13.4%, the Indian Rupee down 6.3% and the Philippine Peso down 5.5%,
mostly reflecting the continued improved outlook for Sterling.
Over the half year, copper moved sharply higher, up 13.6% as the equity
markets gained greater confidence in China's policies to strengthen its
economy and thereby supporting demand for copper. Contrary to this, Brent
crude oil decreased by 18.0% driven partly by concerns around global demand
especially in China and oil supply remaining strong.
Unlisted Investments (Level 3 Investments)
Over the years, UEM has invested in unlisted businesses at a modest level. The
value of the unlisted portfolio has decreased over the half year to 30
September 2024 from £23.1m to £15.9m, driven mainly by the revaluation of
Petalite. In the half year to 30 September 2024 the carrying value of Petalite
was reduced by 58.1% reflecting the challenges in the EV space. Pleasingly,
Petalite has signed a non binding heads of terms contract with a leading
investment fund for a capital injection of £10.0m which is expected to close
this year. This reduction, together with some realisations of other
investments, saw the unlisted investments reduce and as at 30 September 2024
the unlisted investments represented 3.2% of the total portfolio.
Revenue Earnings and Dividend
UEM's revenue earnings per share ("EPS") increased by 9.9% to 6.54p as at 30
September 2024. Dividends remain covered by the EPS.
UEM has declared two quarterly dividends of 2.15p and 2.325p each, totalling
4.475p per share, a 4.1% increase over the previous half year. Based on two
further dividends of 2.325p a quarter, the full year dividend to 31 March 2025
is expected to be 9.125p, an increase of 6.1% on the prior year. The retained
earnings revenue reserve increased by £4.3m over the half year to 30
September 2024 to £14.4m, equal to 7.64p per share.
Capital Return
The portfolio losses were £17.4m on the capital account during the half year
to 30 September 2024 (30 September 2023: gains of £19.3m).
Management and administration fees were almost flat for the second year in a
row at £2.2m. Finance costs decreased marginally as a result of lower
borrowings.
The overall loss on capital return amounted to £20.7m compared to a gain of
£16.5m for 30 September 2023.
Ongoing Charges
Ongoing charges were unchanged at 1.5% for the half year to 30 September 2024.
Share Buybacks
Disappointingly, UEM's share price discount has remained stubbornly high.
Having started the year at 19.3%, it has reduced modestly to 18.4% as at 30
September 2024. This remains well above the level that the Board expects to
see over the medium term. The Company has continued buying back shares for
cancellation, with 2.9m shares bought back in the half year to 30 September
2024, at an average price of 224.06p.
While the Board is keen to see the discount narrow, any share buyback remains
an independent investment decision. Historically the Company has bought back
shares if the discount widens in normal market conditions to over 10.0%. Since
inception, UEM has bought back 89.1m ordinary shares totalling £170.7m. The
share buybacks have contributed 0.3% to UEM's total returns during the six
months ended 30 September 2024.
Bank Debt
During the half year to 30 September 2024, UEM signed a £50.0m multicurrency
revolving credit facility agreement with Barclays Bank PLC on a secured basis.
The initial term is one year and it may be extended from time to time
following agreement between the two parties.
Board
As reported in last year's report and accounts, having joined the Board in
2015, I will retire from the Board on 31 December 2024. Mark Bridgeman, who is
currently the Company's Senior Independent Director, will become Chairman,
with Isabel Liu taking on the role of Senior Independent Director.
Additionally, Nadya Wells joined the Board as a non executive Director on 1
September 2024. Nadya has over 25 years' investment experience in emerging
markets, having spent 13 years with Capital Group as a portfolio manager and
prior to that, a portfolio manager at Invesco Asset Management investing in
Eastern Europe.
Following my departure the Board will comprise a well balanced board of four
directors.
Outlook
The strong win by Donald Trump in the US elections and his MAGA agenda will
mean rising economic tensions globally. It is difficult to have strong
conviction on the impact of his policies and approach, but we expect
volatility to remain elevated and the outcomes for different emerging markets
may well be uneven in nature. We remain confident that our strong management
teams across the portfolio will make the right choices and continue to thrive
in a challenging environment.
John Rennocks
Chairman
25 November 2024
Investment Managers' Report
It was disappointing to see UEM's NAV total return decrease 1.4% for the half
year to 30 September 2024. This was behind the MSCI EM total return Index
which increased by 7.5% during the six months.
Significantly, UEM's NAV performance since inception is ahead of the MSCI EM
total return Index. UEM has achieved this together with a rising dividend
payout; lower volatility (as at 30 September 2024, UEM's five year Beta was
0.82x); and with a portfolio which is significantly differentiated from the
MSCI EM Index, reflected by UEM having an active share of over 98%. For
investors who want exposure to emerging markets, excellent performance and
comparatively low levels of volatility, UEM should be a compelling investment.
The world is faced with a number of unresolved issues, and as noted in the
Chairman's Statement these range from elevated inflation, heightened
geopolitical tensions and climate change. Finding consensus on these concerns
has been and continues to be challenging and therefore we expect volatility to
remain high.
Portfolio
UEM's investments decreased to £502.9m as at 30 September 2024 from £517.2m
as at 31 March 2024. This reflects net investments of £3.2m reduced by
portfolio valuation losses of £17.4m.
At the half year the top thirty holdings accounted for 74.3% of the total
portfolio (31 March 2024: 70.9%). There have been four new entries into the
top thirty holdings over the six months.
· SUNeVision Holdings Limited ("SUNeVision") a Hong Kong listed data
centre operator, increased its position in the portfolio mainly as a result of
its strong share price which gained 49.6% in the six months to 30 September
2024 and UEM increased its position by £0.7m.
· Telelink Business Services Group ("Telelink") a Bulgarian listed IT
services provider, despite its share price being down by 4.9% over the half
year also entered the top thirty.
· VietNam Holding Limited ("VNH") is a UK listed closed end fund
focused on investing in Vietnam, whose share price was up by 5.9% over the six
months.
· Interconexion Electrica S.A. E.S.P ("Interconexion") a Colombian
listed infrastructure company primarily focused on electricity transmission.
UEM increased its position by 18.3% investing £1.0m in the six months to 30
September 2024, although its share price was down 4.7%.
These four investments replaced Petalite, whose valuation was reduced, TTS
(Transport Trade Services) S.A. where UEM reduced its shareholding and its
share price declined by 29.2%, Grupo Traxion S.A.B de C.V. whose share price
declined by 34.9%, and Power Grid Corporation of India Limited which was
exited in full.
Purchases in the portfolio increased to £53.4m in the half year ended 30
September 2024 (30 September 2023: £24.5m) and sales in the half year were
£50.2m (30 September 2023: £56.4m).
There have been some small sector allocation changes during the half year to
30 September 2024 and more detail is set out on page 9. On a geographical
basis, again there were modest changes and more detail is set out on pages 12
and 13. It is worth noting that Brazil remains our largest country exposure at
26.2% (31 March 2024: 25.8%).
Unlisted Investments (Level 3 Investments)
UEM ended the half year with unlisted investments totalling £15.9m (31 March
2024: £23.1m), representing 3.2% of total investments (31 March 2024: 4.5%).
UEM's unlisted investments reduced mainly as a result of the reduction of
Petalite's valuation by £6.9m and a further £1.0m distribution return from
CGN Capital Partners Infra Fund 3 ("CGN").
Pleasingly we continue to receive distributions from CGN, a private Chinese
onshore wind developer.
Petalite has taken a significant step forward in its Series A fund raising by
signing a non binding heads of terms with a market leading investor which sets
out the terms for a £10.0m investment this year followed by £10.0m in the
coming eighteen months. The current valuation reflects the wider market
pressures on EV's sector valuations. UEM reduced Petalite's valuation in line
with the heads of terms.
Environmental, Social and Governance ("ESG")
ESG is a fundamental part of UEM's investment process. ICM has an internally
developed robust framework which is used to evaluate companies on an ESG basis
and is embedded in ICM's investment approach. ESG forms part of the integrated
research analysis, decision making and ongoing monitoring, albeit the key
driver for investments by UEM is equity total returns. Where necessary UEM
will engage with investee companies on ESG matters.
Bank Debt
UEM's net debt, being bank loans and net overdrafts, increased from zero as at
31 March 2024 to £19.5m as at 30 September 2024. UEM repaid its bank debt in
March 2024 when the facility with The Bank of Nova Scotia matured. On 30
August 2024, UEM entered into a £50.0m multi currency revolving credit
secured bank facility agreement with Barclays Bank PLC and as at 30 September
2024 has drawn £19.5m. Cash rose to £17.8m in the half year, largely
reflecting the bank drawdown.
Revenue Return
Revenue income was almost unchanged at £14.7m in the half year to 30
September 2024, from £14.8m in the prior half year, reflecting increased
dividends received from investee companies despite the reduced portfolio
following the repayment of the bank debt in March 2024.
Management fees and other expenses were largely unchanged at £1.5m in the
half year to 30 September 2024 (30 September 2023: £1.6m). Finance costs
reduced from £0.2m to £0.01m reflecting the lower bank borrowings. Taxation
reduced to £0.8m during the half year (30 September 2023: £1.1m) reflecting
decreased dividends received from countries with higher withholding tax rates.
As a result of the above, revenue return for the half year increased by 4.2%
to £12.4m from £11.9m for the half year to 30 September 2023. EPS increased
by 9.9% to 6.54p compared to the prior half year of 5.95p, reflecting the
increase in profit and the reduced average number of shares in issue following
buybacks. Dividends per share ("DPS") of 4.475p were fully covered by
earnings.
Retained revenue reserves rose to £14.4m as at 30 September 2024, equal to
7.64p per share.
Capital Return
The portfolio losses were £17.4m on the capital account during the half year
to 30 September 2024 (30 September 2023: gains of £19.3m). Losses on foreign
exchange were £0.1m and the resultant total income losses on the capital
account was £17.5m against prior year gain of £19.7m.
Management and administration fees were almost flat for the second year in a
row at £2.2m (30 September 2023: £2.2m).
Finance costs decreased to £0.03m from £0.7m as a result of lower
borrowings. There was a taxation charge of £0.9m (30 September 2023: £0.3m)
which arose from Indian capital gains tax. The net effect of the above was a
capital return loss of £20.7m compared to a gain of £16.5m for 30 September
2023.
Charles Jillings
ICM Investment Management Limited and ICM Limited
25 November 2024
Half-Yearly Financial Report And Responsibility Statement
The Chairman's Statement and the Investment Managers' Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
Principal Risks and Uncertainties
Most of UEM's principal risks and uncertainties are market related and are
similar to those of other investment companies investing mainly in listed
equities in emerging markets.
The principal risks and uncertainties were described in more detail under the
heading "Principal Risks and Risk Mitigation" within the Strategic Report
section of the Annual Report and Accounts for the year ended 31 March 2024 and
have not changed materially since the date of that document.
The principal risks faced by UEM include not achieving long term total returns
for its shareholders, adverse market conditions leading to a fall in NAV, loss
of key management, its shares trading at a discount to NAV, losses due to
inadequate controls of third party service providers, gearing risk and
regulatory risk. In addition, the Board continues to monitor a number of
emerging risks that could potentially impact the Company, the principal ones
being geopolitical risk and climate change risk.
The Annual Report and Accounts is available on the Company's website,
www.uemtrust.co.uk
Related Party Transactions
Details of related party transactions in the six months to 30 September 2024
are set out in note 9 to the accounts and details of the fees paid to the
Investment Managers are set out in note 2 to the accounts. Directors' fees
were increased by approximately 2.9% with effect from 1 April 2024 to:
Chairman £54,000 per annum; Chair of Audit & Risk Committee £50,500 per
annum; and other Directors £40,000 per annum.
The net fee entitlement of each Director is satisfied in shares of the
Company, purchased in the market by each Director at around each quarter end.
Directors' Responsibility Statement
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
• the condensed set of financial statements contained within the report
for the six months to 30 September 2024 has been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting" on a going
concern basis and gives a true and fair view of the assets, liabilities,
financial position and return of the Company;
• the half-yearly report, together with the Chairman's Statement and
Investment Managers' Report, includes a fair review of the important events
that have occurred during the first six months of the financial year and their
impact on the financial statements as required by DTR 4.2.7R;
• the Directors' statement of principal risks and uncertainties above
is a fair review of the principal risks and uncertainties for the remainder of
the year as required by DTR 4.2.7R; and
• the half-yearly report includes a fair review of the related party
transactions that have taken place in the first six months of the financial
year as required by DTR 4.2.8R.
On behalf of the Board
John Rennocks
Chairman
25 November 2024
Condensed Statement Of Comprehensive Income (Unaudited)
Six months to Six months to
30 September 2024 30 September 2023
Notes Revenue Capital Total Revenue Capital Total
return return return return return return
£'000s £'000s £'000s £'000s £'000s £'000s
(Losses)/gains on investments - (17,438) (17,438) - 19,284 19,284
Foreign exchange (losses)/gains - (100) (100) - 403 403
Investment and other income 14,738 - 14,738 14,758 - 14,758
Total income/(loss) 14,738 (17,538) (2,800) 14,758 19,687 34,445
2 Management and administration fees (723) (2,239) (2,962) (699) (2,169) (2,868)
Other expenses (824) - (824) (877) - (877)
Profit/(loss) before finance costs and taxation 13,191 (19,777) (6,586) 13,182 17,518 30,700
Finance costs (8) (34) (42) (166) (663) (829)
Profit/(loss) before taxation 13,183 (19,811) (6,628) 13,016 16,855 29,871
3 Taxation (805) (921) (1,726) (1,076) (315) (1,391)
Profit/(loss) for the period 12,378 (20,732) (8,354) 11,940 16,540 28,480
4 Earnings per share (basic) - pence 6.54 (10.96) (4.42) 5.95 8.24 14.19
All items in the above statement derive from continuing operations.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
The net return on ordinary activities after taxation represents the profit for
the period and also the total comprehensive Income.
Condensed Statement Of Changes In Equity (Unaudited)
for the six months to 30 September 2024
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as at 31 March 2024 1,909 76,706 436 407,180 26,603 10,099 522,933
7 Shares purchased by the (29) - 29 (6,527) - - (6,527)
Company and cancelled
(Loss)/profit for the period - - - - (20,732) 12,378 (8,354)
5 Dividends paid in the period - - - - - (8,119) (8,119)
Balance as at 30 September 2024 1,880 76,706 465 400,653 5,871 14,358 499,933
for the six months to 30 September 2023
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as at 31 March 2023 2,023 76,706 322 432,577 (13,841) 9,587 507,374
7 Shares purchased by the (45) - 45 (9,918) - - (9,918)
Company and cancelled
Profit for the period - - - - 16,540 11,940 28,480
5 Dividends paid in the period - - - - - (8,614) (8,614)
Balance as at 30 September 2023 1,978 76,706 367 422,659 2,699 12,913 517,322
for the year ended 31 March 2024
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as at 31 March 2023 2,023 76,706 322 432,577 (13,841) 9,587 507,374
7 Shares purchased by the (114) - 114 (25,397) - - (25,397)
Company and cancelled
Profit for the year - - - - 40,444 17,447 57,891
5 Dividends paid in the year - - - - - (16,935) (16,935)
Balance as at 31 March 2024 1,909 76,706 436 407,180 26,603 10,099 522,933
Condensed Statement Of Financial Position (Unaudited)
Notes as at 30 Sep 2024 30 Sep 2023 31 Mar 2024
£'000s £'000s £'000s
Non-current assets
11 Investments 502,949 533,066 517,195
Current assets
Other receivables 2,654 2,460 6,078
Cash and cash equivalents 17,826 774 5,751
20,480 3,234 11,829
Current liabilities
Other payables (3,156) (5,206) (4,573)
Bank loans (19,503) (11,837) -
(22,659) (17,043) (4,573)
Net current (liabilities)/assets (2,179) (13,809) 7,256
Total assets less current liabilities 500,770 519,257 524,451
Non-current liabilities
Deferred tax (837) (1,935) (1,518)
Net assets 499,933 517,322 522,933
Equity attributable to equity holders
7 Ordinary share capital 1,880 1,978 1,909
Merger reserve 76,706 76,706 76,706
Capital redemption reserve 465 367 436
Special reserve 400,653 422,659 407,180
Capital reserves 5,871 2,699 26,603
Revenue reserve 14,358 12,913 10,099
Total attributable to equity holders 499,933 517,322 522,933
8 Net asset value per share
Basic - pence 266.00 261.58 274.01
Condensed Statement Of Cash Flows (Unaudited)
Six months to Six months to Year to
30 Sep 2024 30 Sep 2023 31 Mar 2024
£'000s £'000s £'000s
Operating activities
(Loss)/profit before taxation (6,628) 29,871 61,209
Deduct investment income - dividends (13,750) (13,890) (21,100)
Deduct investment income - interest (935) (828) (1,932)
Deduct bank interest received (53) (40) (47)
Add back interest charged 42 829 1,592
Add back losses/(gains) on investments 17,438 (19,284) (46,836)
Add back foreign currency losses/(gains) 100 (403) (610)
Decrease/(increase) in other receivables 51 (31) (30)
Increase/(decrease) in other payables 870 (20) (683)
Net cash outflow from operating activities (2,865) (3,796) (8,437)
before dividends and interest
Interest paid - (1,044) (1,813)
Dividends received 13,921 13,444 20,212
Investment income - interest received 698 321 1,125
Bank interest received 53 40 47
Taxation paid (2,400) (1,086) (3,431)
Net cash inflow from operating activities 9,407 7,879 7,703
Investing activities
Purchases of investments (55,563) (23,368) (75,544)
Sales of investments 53,665 55,550 151,442
Net cash (outflow)/inflow from investing activities (1,898) 32,182 75,898
Financing activities
Repurchase of shares for cancellation (6,421) (9,751) (25,397)
Dividends paid (8,119) (8,614) (16,935)
Drawdown of bank loans 19,306 1,599 19,821
Repayment of bank loans - (24,283) (53,943)
Net cash inflow/(outflow) from financing activities 4,766 (41,049) (76,454)
Increase/(decrease) in cash and cash equivalents 12,275 (988) 7,147
Cash and cash equivalents at the start of the period 5,751 (1,026) (1,026)
Effect of movement in foreign exchange (200) (178) (370)
Cash and cash equivalents at the end of the period 17,826 (2,192) 5,751
Comprised of:
Cash 17,826 774 5,751
Bank overdraft - (2,966) -
Total 17,826 (2,192) 5,751
Notes To The Accounts (Unaudited)
1. Accounting Policies
The Company is an investment company incorporated in the United Kingdom listed
in the closed ended investment funds category of the Official List of the
Financial Conduct Authority and whose shares are admitted to trading on the
London Stock Exchange's Main Market for listed securities.
The unaudited condensed accounts have been prepared in accordance with UK
adopted International Accounting Standards, which comprise standards and
interpretations approved by the IASB and International Accounting Standards
and Standing Interpretations Committee interpretations approved by the IASC
that remain in effect and to the extent that they are in conformity with the
requirement of the Companies Act 2006 ("IFRS"), IAS 34 "Interim Financial
Reporting" and the accounting policies set out in the audited statutory
accounts for the year ended 31 March 2024.
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. The significant
judgements made by the Directors in applying the accounting policies and key
sources of uncertainty were the same as those applied to the financial
statements as at and for the year ended 31 March 2024.
The condensed Accounts do not include all of the information required for full
annual accounts and should be read in conjunction with the accounts of the
Company for the year ended 31 March 2024, which were prepared under full IFRS
requirements.
2. Management And Administration Fees
The Company has appointed ICM Investment Management Limited ("ICMIM") as its
Alternative Investment Fund Manager and joint portfolio manager with ICM
Limited ("ICM"), for which they are entitled to a management fee. The
aggregate fees payable by the Company are apportioned between the Investment
Managers as agreed by them.
The relationship between ICMIM and ICM is compliant with the requirements of
the UK version of the EU Alternative Investment Fund Managers Directive as it
forms part of UK domestic law by virtue of the European Union (Withdrawal) Act
2018, as amended, and also such other requirements applicable to ICMIM by
virtue of its regulation by the Financial Conduct Authority.
The annual management fee is a tiered structure as follows: 1.0% of NAV up to
and including £500m; 0.9% of NAV exceeding £500m up to and including £750m;
0.85% of NAV exceeding £750m up to and including £1,000m; and 0.75% of NAV
exceeding £1,000m, payable quarterly in arrears. The management fee is
allocated 80% to capital return and 20% to revenue return. The investment
management agreement may be terminated upon six months' notice.
ICMIM also provides company secretarial services to the Company, with the
Company paying £35,000 (30 September 2023: £35,000 and 31 March 2024:
£70,000) equivalent to 45% of the costs associated with this office and
recharges research fees to the Company based on a budget of £0.3m per annum,
paid quarterly in arrears. These charges are allocated 80% to capital return
and 20% to revenue return.
JPMorgan Chase Bank N.A. - London Branch has been appointed Administrator and
ICMIM has appointed Waverton to provide certain support services (including
middle office, market dealing and information technology support services).
3. Taxation
The revenue return taxation charge of £805,000 (30 September 2023:
£1,076,000 and 31 March 2024: £1,958,000) relates to irrecoverable overseas
taxation suffered on dividend and interest income.
The capital return taxation expense of £921,000 (30 September 2023: £315,000
and 31 March 2024: £1,360,000) relates to capital gains on realised gains on
sale of overseas investments and deferred tax in respect of capital gains tax
on overseas unrealised investment gains that may be subject to taxation in
future years.
4. Earnings Per Share
Earnings per share is the profit attributable to shareholders and based on the
following data:
Six months to Six months to Year to
30 Sep 2024 30 Sep 2023 31 Mar 2024
£'000s £'000s £'000s
Revenue return 12,378 11,940 17,447
Capital return (20,732) 16,540 40,444
Total return (8,354) 28,480 57,891
Number Number Number
Weighted average number of ordinary shares in issue 189,171,264 200,672,201 197,484,731
during the period for basic earnings per share calculations
Pence Pence Pence
Revenue return per share 6.54 5.95 8.83
Capital return per share (10.96) 8.24 20.48
Total return per share (4.42) 14.19 29.31
5. Dividends
Record date Payment date 30 Sep 30 Sep 2023 £'000s 31 Mar 2024 £'000s
2024
£'000s
2023 Fourth quarterly dividend of 2.15p per share 02-Jun-23 23-Jun-23 - 4,334 4,334
2024 First quarterly dividend of 2.15p per share 01-Sep-23 22-Sep-23 - 4,280 4,280
2024 Second quarterly dividend of 2.15p per share 01-Dec-23 15-Dec-23 - - 4,206
2024 Third quarterly dividend of 2.15p per share 08-Mar-24 28-Mar-24 - - 4,115
2024 Fourth quarterly dividend of 2.15p per share 07-Jun-24 28-Jun-24 4,072 - -
2025 First quarterly dividend of 2.15p per share 06-Sep-24 27-Sep-24 4,047 - -
8,119 8,614 16,935
The Directors have declared a second quarterly dividend in respect of the year
ending 31 March 2025 of 2.325p per share payable on 19 December 2024 to
shareholders on the register at close of business on 29 November 2024. The
total cost of the dividend, which has not been accrued in the results for the
six months to 30 September 2024, is £4,352,000 based on 187,180,507 shares in
issue as at 22 November 2024.
6. Bank Loans
On 30 August 2024, the Company entered into a secured multi-currency revolving
credit facility of £50,000,000 with Barclays Bank PLC expiring on 29 August
2025. Secured investments are held within a UEM segregated account at the
Custodian. The main covenants are: secured investments to have constituents of
the FTSE All World index of at least 1.5 times greater than the loans drawn;
and the loans drawn to the secured investments to be a maximum of 50%. The
terms of the loan facility, including those related to accelerated repayment
and costs of repayment, are typical of those normally found in facilities of
this nature. The Company has the option each quarter to request an extension
to the expiry date of the facility subject to the commitment period being no
more than 365 days. Subsequent to the period end, the Company requested an
extension of the expiry date to 28 November 2025 which was agreed, effective
on and from 28 November 2024. Commitment fees are charged on any undrawn
amounts at commercial rates. The £50m loan facility with Bank of Nova Scotia,
London Branch expired on 15 March 2024.
As at 30 September 2024 £19,503,000 (30 September 2023: £11,837,000 and 31
March 2024: £nil) was drawn down. The value of the investments held within
the segregated secured account as at 30 September 2024 was £153,859,000 (30
September 2023 and 31 March 2024: not applicable).
7. Ordinary Share Capital
Issued, called up and fully paid
Ordinary shares of 1p each Number £'000s
Balance as at 31 March 2024 190,842,503 1,909
Purchased for cancellation by the Company (2,897,524) (29)
Balance as at 30 September 2024 187,944,979 1,880
During the period the Company bought back for cancellation 2,897,524 (30
September 2023: 4,441,578 and 31 March 2024: 11,369,753) ordinary shares at a
total cost of £6,527,000 (30 September 2023: £9,918,000 and 31 March 2024:
£25,397,000).
A further 764,472 ordinary shares have been purchased for cancellation at a
total cost of £1,629,000 since the period end
8. Net Asset Value Per Share
The NAV per share is based on the net assets attributable to the equity
shareholders of £499,933,000 (30 September 2023: £517,322,000 and 31 March
2024 £522,933,000) and on 187,944,979 ordinary shares, being the number of
ordinary shares in issue at the period end (30 September 2023: 197,770,678
and 31 March 2024: 190,842,503).
9. Related Party Transactions
The following are considered related parties of the Company: the subsidiary
undertaking (UEM (HK) Limited), the associates of the Company (EBP Holdings
Limited, East Balkan Properties plc, Petalite Limited and Pitch Hero Holdings
Limited), the Board of UEM, ICM and ICMIM (the Company's joint portfolio
managers), Mr Saville, Mr Jillings (a key management person of ICMIM) and UIL
Limited.
As at 31 March 2024 the fair value of the loan held with UEM (HK) Limited was
£4,711,000 and loan interest accrued was £43,000. In the period, UEM(HK)
repaid £306,000 of interest and £652,000 of capital. As at 30 September 2024
the fair value of the loan held with UEM (HK) Limited was £3,617,000 and loan
interest accrued was £6,000.
There were no transactions with EBP Holdings Limited or East Balkan Properties
plc.
Pursuant to a loan agreement dated 24 October 2023 under which UEM has agreed
to loan monies to Petalite, UEM advanced to Petalite £1,000,000 in the
period. As at 30 September 2024, the balance of the loan and interest
outstanding was £2,714,000 (31 March 2024: £1,547,000). The loan bears
interest at 10% p.a. for the first 6 months, 12% for months 7 to 9 and 14%
thereafter. The loan term was extended and is repayable by 31 December 2024.
As part of the loan agreement, UEM received 2 year warrants to subscribe for
£2.5m at a valuation to be determined by a capital raise planned to be
effected in 2024 ("Series A raise").
Pursuant to an extension and amendment (dated 24 August 2023) of a loan
agreement dated 1 March 2021 under which UEM has agreed to loan monies to
Pitch Hero, as at 30 September 2024 the balance of the loan and interest
outstanding was £689,000 (31 March 2024: £657,000). The loan bears interest
at an annual rate of 10% (having been 5% up until 24 August 2023). The first
repayment date is due in the quarter starting on 25 August 2024, with a final
repayment date of 25 August 2027.
The Board received aggregate remuneration of £96,000 (30 September 2023:
£108,000 and 31 March 2024: £198,000) included within "Other expenses" for
services as Directors). As at the period end, £nil (30 September 2023: £nil
and 31 March 2024: £nil) remained outstanding to the Directors. In addition
to their fees, the Directors received dividends totalling £13,000 (30
September 2023: £21,000 and 31 March 2024: £33,000) during the period under
review in respect of their shareholdings in the Company. There were no further
transactions with the Board during the period.
There were no transactions with ICM, ICMIM, ICM Investment Research Limited or
ICM Corporate Services (Pty) Ltd, subsidiaries of ICM, other than investment
management, secretarial costs, research fees as set out in note 2 of
£2,799,000 (30 September 2023: £2,701,000 and 31 March 2024: £5,460,000)
and reimbursed expenses included within Other Expenses of £46,000 (30
September 2023: £30,000 and 31 March 2024: £140,000). As at the period end
£1,290,000 (30 September 2023: £1,345,000 and 31 March 2024: £376,000)
remained outstanding in respect of management, company secretarial and
research fees.
Mr Jillings received dividends totalling £20,000 (30 September 2023: £20,000
and 31 March 2024: £40,000) and UIL Limited received dividends totalling
£399,000 (30 September 2023: £784,000 and31 March 2024: £1,310,000).
10. Going Concern
Notwithstanding that the Company has reported net current liabilities of
£2,179,000 as at 30 September 2024 (30 September 2023: £13,809,000 and 31
March 2024: net current assets £7,256,000), the financial statements have
been prepared on a going concern basis which the Directors consider to be
appropriate for the following reasons. The Board's going concern assessment
has focused on the forecast liquidity of the Company for at least twelve
months from the date of approval of the financial statements. This analysis
assumes that the Company would, if necessary, be able to meet some of its
short term obligations through the sale of listed securities, which
represented 96.8% of the Company's total portfolio as at 30 September 2024. As
part of this assessment the Board has considered a severe but plausible
downside that reflects the impact of the Company's key risks and an assessment
of the Company's ability to meet its liabilities as they fall due assuming a
significant reduction in asset values and accompanying currency volatility.
The Board also considered reverse stress testing to identify the reduction in
the valuation of liquid investments that would cause the Company to be unable
to meet its net liabilities, being primarily the bank loan. The Board is
confident that the reduction in asset values implied by the reverse stress
test is not plausible even in the current volatile environment. Consequently,
the Directors believe that the Company will have sufficient funds to continue
to meet its liabilities as they fall due for at least twelve months from the
date of approval of the financial statements.
Accordingly, the Board considers it appropriate to continue to adopt the going
concern basis in preparing the accounts
11. Fair Value Hierarchy
IFRS 13 'Financial Instruments: Disclosures' require an entity to classify
fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value
hierarchy shall have the following levels:
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data
from observable markets.
Level 3 reflects financial instruments whose fair value is determined in whole
or in part using a valuation technique based on assumptions that are not
supported by prices from observable market transactions in the same instrument
and not based on available observable market data.
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 30 Sep 2024
£'000s £'000s £'000s Total
£'000s
Investments 476,827 10,242 15,880 502,949
Level 1 £'000s Level 2 £'000s Level 3 £'000s 30 Sep 2023
Total
£'000s
Investments 481,123 8,160 43,783 533,066
Level 1 £'000s Level 2 £'000s Level 3 £'000s 31 Mar 2024
Total
£'000s
Investments 487,603 6,478 23,114 517,195
During the period one stock with a value of £7.0m was transferred from level
1 to level 2 due to the investee company shares trading irregularly. The book
cost and fair value was transferred using the 31 March 2024 balances, and all
subsequent trades are therefore disclosed in the level 2 column (30 September
2023: two stocks with a value of £4.6m were transferred from level 1 to level
2 due to the investee company shares trading irregularly. The book cost and
fair value was transferred using the 31 March 2023 balances, and all
subsequent trades are therefore disclosed in the level 2 column and 31 March
2024: three holdings with a value of £9.4m were transferred from level 1 to
level 2 due to the investee companies shares trading irregularly in the year.
The book cost and fair value were transferred using the 31 March 2023
balances).
A reconciliation of fair value measurements in level 3 is set out in the
following table:
Six months to Six months to Year to
30 Sep 2024 30 Sep 2023 31 Mar 2024
£'000s £'000s £'000s
Valuation brought forward 23,114 58,693 58,693
Purchases 1,306 466 2,600
Sales (951) (4,279) (9,435)
(Losses)/gains on sale of investments (26) 139 742
Losses on investments held at end of period (7,563) (11,236) (29,486)
Valuation carried forward 15,880 43,783 23,114
Analysed
Cost of investments 23,720 25,810 23,391
(Losses)/gains on investments (7,840) 17,973 (277)
Valuation carried forward 15,880 43,783 23,114
12. Financial Risk Management - Level 3 Financial Instruments
Valuation methodology
The objective of using valuation techniques is to arrive at a fair value
measurement that reflects the price that would be received to sell the asset
or paid to transfer the liability in an orderly transaction between market
participants at the measurement date. The Company uses proprietary valuation
models, which are compliant with IPEV guidelines and IFRS 13 and which are
usually developed from recognised valuation techniques.
The Directors have satisfied themselves as to the methodology used, the
discount rates and key assumptions applied, and the valuations. The
methodologies used to determine fair value are described in the 2024 Report
and Accounts. The level 3 assets comprise a number of unlisted investments at
various stages of development and each has been assessed based on its
industry, location and business cycle. The valuation methodologies include net
assets, discounted cash flows, cost of recent investment or last funding
round, listed peer comparison or peer group multiple, as appropriate. Where
applicable, the Directors have considered observable data and events to
underpin the valuations. A discount has been applied, where appropriate, to
reflect both the unlisted nature of the investments and business risks.
Sensitivity of level 3 financial investments measured at fair value to changes
in key assumptions
Level 3 inputs are sensitive to assumptions made when ascertaining fair value.
While the Directors believe that the estimates of fair value are appropriate,
the use of different methodologies or assumptions could lead to different
measurements of fair value. The sensitivities shown in the table below give an
indication of the effect of applying reasonable and possible alternative
assumptions.
In assessing the level of reasonably possible outcomes consideration was also
given to the impact on valuations of the elevated level of volatility in
equity markets during the period, principally reflecting concerns about high
rates of inflation, tightening energy supplies, higher interest rates and the
Ukraine and Middle East conflicts. The impact on the valuations has been
varied and largely linked to their relevant sectors and this has been
reflected in the level of sensitivities applied.
The following table shows the sensitivity of the fair value of level 3
financial investments to changes in key assumptions.
As at 30 September 2024
Investment Investment Valuation Risk Sensitivity Carrying Sensitivity
type methodology weighting +/- amount £'000s
£'000s
Petalite Equity/Loan Last funding High 70% 4,227 2,959
round *
UEM (HK) Limited - Loan NAV Low 10% 3,617 362
CGN Capital Partners
Infra Fund 3
EBP Holdings Limited Equity Fair value of net assets Medium 20% 2,998 600
Other investments Equity Various Medium 20% 4,349 870
Other investments Loan Discounted Medium 20% 689 138
cash flows
Total 15,880 4,929
As at 30 September 2023
Investment Investment Valuation Risk Sensitivity Carrying Sensitivity
type methodology weighting +/- amount £'000s
£'000s
Petalite Equity Last funding High 50% 24,916 12,458
round
UEM (HK) Limited - Loan NAV Low 10% 9,706 971
CGN Capital Partners
Infra Fund 3
Conversant Solutions Equity Peer Medium 20% 3,324 665
Pte Ltd multiples
Other investments Equity Various Medium 20% 5,307 1,061
Other investments Loans Discounted Medium 20% 530 106
cash flows
Total 43,783 15,261
As at 31 March 2024
Investment Investment Valuation Risk Sensitivity Carrying Sensitivity
type methodology weighting +/- amount £'000s
£'000s
Petalite Equity/Loan Last funding High 70% 10,082 7,057
round
UEM (HK) Limited - Loan NAV Low 10% 4,711 471
CGN Capital Partners
Infra Fund 3
EBP Holdings Limited Equity Fair value of net assets Medium 20% 3,452 690
Other investments Equity Various Medium 20% 4,212 842
Other investments Loan Discounted Medium 20% 657 131
cash flows
Total 23,114 9,191
* Valuation of investment in Petalite
Petalite is an unlisted electric vehicle ("EV") charging infrastructure
company based in the UK that has been developing a new technology which
enables more reliable and cost effective EV chargers. UEM holds 10,725
ordinary shares in Petalite and factoring in the dilutive options within
Petalite, the Company's stake is 28.3% of the shareholding. As at 30 September
2024, UEM carried this investment at £1.7m. UEM has also provided a loan of
£2.5m to Petalite. Petalite's fair value has been given a sensitivity of 70%
reflecting the high level of uncertainty due to the length of time since the
last fundraise and the fact that Petalite remains pre-revenue. As Petalite has
yet to commercialise its technology and is pre-revenue it remains reliant on
external funding. UEM's 30 September 2024 equity valuation reflects the most
recent price indications from the Series A fund raise which is ongoing.
13. Results
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in Sections 434 - 436 of the
Companies Act 2006. The financial information for the six months ended 30
September 2024 and 30 September 2023 have neither been audited nor reviewed by
the Company's auditors.
The information for the year ended 31 March 2024 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditor on those accounts contained
no qualification or statement under Section 498(2) or (3) of the Companies Act
2006.
Legal Entity Identifier: 2138005TJMCWR2394O39
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